What is partnership-at-will?

Partnership-at-will is a form of partnership that continues indefinitely at the pleasure of the partners, terminable at any time by any partner giving notice to the others, and it is defined and governed by Section 7 of the Indian Partnership Act, 1932.

The Statutory Definition

Section 7 provides that where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is "partnership-at-will". The provision thus lays down two cumulative conditions for a partnership to qualify as one at will: first, there must be no fixed term specified for its duration, and second, there must be no provision made for how the partnership is to be determined, for instance by reference to the completion of a particular venture or the occurrence of a specified event. If either of these matters has been settled by the partners in their agreement, the partnership ceases to be one at will and instead becomes what Section 8 calls a "particular partnership," formed for a fixed term or for the carrying out of one or more specific undertakings.

Distinguishing Partnership-at-Will from Other Kinds of Partnership

The contrast drawn by Sections 7 and 8 together is instructive. Section 8 recognises that a person may become a partner with another "in particular adventures or undertakings," and where such a partnership is formed for a particular undertaking, or where a partnership is entered into for a fixed term, the partnership does not automatically continue merely because that term has been fixed or because the venture happens to endure — its continuation instead depends on the terms actually agreed. A partnership-at-will, by contrast, carries no such internal expiry mechanism; it is open-ended by its very nature, and its continuance is a matter of the continuing consent of the partners rather than of any predetermined limit.

How a Partnership-at-Will Comes to an End

The defining practical consequence of a partnership being "at will" lies in Section 43 of the Act, which deals with dissolution by notice. Section 43(1) provides that where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. Section 43(2) further specifies that the firm is dissolved as from the date mentioned in the notice as the date of dissolution, or, if no date is so mentioned, as from the date of the communication of the notice. This right of unilateral dissolution by mere notice is the direct corollary of the absence of any fixed term or determinable event: since the partners never agreed upon any particular point at which the partnership was to end, the law supplies each partner with the power to bring the relationship to a close whenever he chooses, simply by communicating his intention in writing to the others.

Illustration

An illustration helps make the operation of Section 7 concrete. If A and B enter into partnership to carry on a general trading business, without specifying any period for which the partnership is to last and without stipulating that it is to end upon the completion of any particular transaction, theirs is a partnership-at-will. Either A or B may, at any time, dissolve the firm simply by giving the other written notice of his intention to do so, and the firm stands dissolved from the date specified in that notice, or from the date the notice is communicated if no date is mentioned. If, however, A and B had instead agreed to carry on business only for five years, or only until a particular consignment of goods had been bought and resold, their partnership would be a particular partnership under Section 8, and neither partner could unilaterally terminate it merely by giving notice before the expiry of the agreed term or the completion of the agreed venture, since Section 43's notice-based dissolution applies specifically, and only, to partnerships at will.

Underlying Rationale

The rule reflects the essentially contractual and voluntary character of partnership discussed earlier in relation to Section 5 — since no partner can be compelled to remain bound to an association he no longer wishes to continue, the law is reluctant to lock partners into an indefinite relationship without any mechanism of exit, particularly where they themselves never agreed to any fixed duration in the first place. At the same time, by requiring written notice rather than permitting informal or unilateral abandonment, Section 43 ensures a degree of certainty and fairness for the remaining partners, who must be clearly informed both of the fact of dissolution and of the date from which it takes effect, so that the winding up of the firm's affairs under the subsequent provisions of the Act may proceed in an orderly manner.